COBLAW2 Law on Business Organizations Partnership PDF

[COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Primary References Section 2. Corporation Defined. - A corporation is an artificial being created by operation of law, having the...

[COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Primary References Section 2. Corporation Defined. - A corporation is an artificial being created by operation of law, having the ​ Civil Code of the Philippines (Partnership) right of succession and the powers, attributes, and ​ Revised Corporation Code, Republic Act No. properties expressly authorized by law or incidental to its 11232 (Corporation) existence. ​ Securities and Exchange Commission Memoranda and Issuances C.​ Code of Commerce ​ Supreme Court Reports Annotated (SCRA); Philippine Reports; Lex Libris Article 239. Merchants may have an interest in the transactions of other merchants, contributing thereto the Suggested Secondary References: amount of capital they may agree upon, and ​ De Leon, Hector S., The Law on Partnership and participating in the favorable or unfavorable results of Private Corporations (Latest Edition) said transactions in the proportion which they may fix. Zoom Link to online class on Thursdays Module 1B Discussion Points: Module 1A A.​ Definition Discussion Points: B.​ Characteristics of Partnership A.​ Introduction: Why the need to understand C.​ Essential Requisites of Partnership: Business Organizations? 1.​ There must be a valid contract B.​ Historical Background: 2.​ Parties must have legal capacity Spanish Colonial Period (Code of 3.​ Object must be lawful Commerce) 4.​ Primary Purpose is to obtain profit and 1.​ Sociedad Regular Colectiva (General divide the same among the parties Partnership) 5.​ There must be mutual contribution 2.​ Sociedad en Comandita (Limited D.​ Delectus Personae Partnership) E.​ Partnership as Separate Juridical 3.​ Sociedad Anonima Personality 4.​ Sociedad de Cuentas en Participación F.​ Partnership v. Co-Ownership/ Conjugal 5.​ Repealing Law Partnership of Gains/Voluntary C.​ Common Types Association 1.​ Sole Proprietorship G.​ Secret Partnership 2.​ Joint Accounts 3.​ Partnership Required Readings: a.​ Joint Accounts as distinguished to A.​ Civil Code Partnerships 4.​ Cooperative Article 1767. By the contract of partnership two or more 5.​ Corporation persons bind themselves to contribute money, property, b.​ Partnerships as distinguished to or industry to a common fund, with the intention of Corporations dividing the profits among themselves. 6.​ Others (eg. Joint Ventures, Business Trusts, and Syndicate) Two or more persons may also form a partnership for the exercise of a profession. (1665a) Required Readings: A.​ Civil Code Article 1768. The partnership has a juridical personality separate and distinct from that of each of the partners, Article 1767. By the contract of partnership two or more even in case of failure to comply with the requirements persons bind themselves to contribute money, property, of article 1772, first paragraph. (n) or industry to a common fund, with the intention of dividing the profits among themselves. Article 1769. In determining whether a partnership exists, these rules shall apply: B.​ Revised Corporation Code 1 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) (1)​ Except as provided by article 1825, persons who are not partners as to each other are not partners as to third persons; (2)​ Co-ownership or co-possession does not of itself establish a partnership, whether such-co-owners or co-possessors do or do not share any profits made by the use of the property; (3)​ The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived; (4)​ The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: (5)​ As a debt by installments or otherwise; (6)​ As wages of an employee or rent to a landlord; (7)​ As an annuity to a widow or representative of a deceased partner; (8)​ As interest on a loan, though the amount of payment vary with the profits of the business; (9)​ As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. (n) Article 1770. A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners. Article 1775. Associations and societies, whose articles are kept secret among the members, and wherein any one of the members may contract in his own name with third persons, shall have no juridical personality, and shall be governed by the provisions relating to co-ownership. (1669) 2 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Module 2A Discussion Points: A.​ Form of Partnership Contract B.​ Registration of Partnership C.​ Partnership with Contribution of Immovable Property Related articles: Article 1771. A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument* shall be necessary. (1667a) *A public instrument is a necessary requirement for the formation of a *A de jure partnership is a legally valid partnership formed by strict partnership when immovable property or real rights are contributed. compliance with all legal requirements. It is not subject to challenge by According to Article 1771, a partnership can be created in any form, the State. but if real property or real rights are involved, a public instrument is *A de facto partnership exists when parties have attempted to form a required (e.g. contract, recording, presence of a spouse). partnership but have some defects in their compliance with legal requirements [see previous conversation]. While it may be challenged Article 1772. Every contract of partnership having a by the state, it is recognized as valid against third parties. capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must *A partnership by estoppel does not require an actual partnership, but it is founded on misrepresentations that lead a third party to believe be recorded in the Office of the Securities and Exchange that a partnership exists. Liability arises due to the misrepresentation Commission. rather than the existence of a valid partnership agreement or any actual intent to create a partnership (1825). Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership E.​ Universal Partnership of All Present and the members thereof to third persons. (n) Property v. Universal Partnership of Profits Article 1773. A contract of partnership is void, whenever Related articles: immovable property is contributed thereto, if an Article 1775. Associations and societies, whose articles inventory of said property is not made, signed by the are kept secret among the members, and wherein any parties, and attached to the public instrument. (1668a) one of the members may contract in his own name with third persons, shall have no juridical personality, and Article 1774. Any immovable property or an interest shall be governed by the provisions relating to therein may be acquired in the partnership name. Title co-ownership. (1669) so acquired can be conveyed only in the partnership name. (n) *The law on co-ownership D.​ Different Kinds of Partnership Article 1776. As to its object, a partnership is either 1.​ as to the extent of subject matter universal or particular. 2.​ as to liability of partners 3.​ as to its duration As regards the liability of the partners, a partnership 4.​ as to the legality of existence may be general* or limited*. (1671a) 5.​ as to representation to others *General: General Partnership: All partners are liable pro rata with all their property after partnership assets are exhausted for contracts 6.​ as to publicity entered into on behalf of the partnership. Any partner may enter into a separate obligation to perform a partnership contract. Stipulations against this liability are void, except as among the partners. *Limited: In a limited partnership, there are general partners who manage the business and have unlimited liability, and limited partners whose liability is limited to the amount of their investment. Article 1777. A universal partnership may refer to all the present property or to all the profits. (1672) 3 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Article 1778. A partnership of all present property is that thus, temporary. A joint venture falls within the meaning in which the partners contribute all the property which of the term “particular partnership.” actually belongs to them to a common fund, with the intention of dividing the same among themselves, as G.​ Different Kinds of Partners well as all the profits which they may acquire therewith. 1.​ as to the nature of contribution (1673) 2.​ as to management 3.​ as to exposure to public perception Article 1779. In a universal partnership of all present 4.​ Secret Partner property, the property which belonged to each of the a.​ Who is active in their own partners at the time of the constitution of the business but not known to the partnership, becomes the common property of all the public partners, as well as all the profits which they may 5.​ Silent Partner acquire therewith. a.​ A person who is not active in the partnership business but is A stipulation for the common enjoyment of any other well known to the public as a profits may also be made; but the property which the partner; contribution is goodwill partners may acquire subsequently by inheritance, 6.​ Dormant Partner legacy, or donation cannot be included in such a.​ Who is not active inside the stipulation, except the fruits thereof. (1674a) business and is not not known to the public; combination of Article 1780. A universal partnership of profits comprises silent and secret partner; he all that the partners may acquire by their industry or may withdraw from the work during the existence of the partnership. partnership without giving notice Movable or immovable property which each of the b.​ They contributed a lot to the partners may possess at the time of the celebration of partnership in the beginning the contract shall continue to pertain exclusively to each, only the usufruct* passing to the partnership. (1675) Types of partners summary: *the right to enjoy the use and advantages of another’s property short of the destruction or waste of its substance Article 1781. Articles of universal partnership, entered into without specification of its nature, only constitute a universal partnership of profits. (1676) Article 1782. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership. (1677) F.​ Particular Partnership Related articles: Article 1783. A particular partnership* has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation. (1678) *A particular partnership is formed to deal with a clearly defined thing, a specific use or income from specific things, a single undertaking or a specific profession; is characterized by its specific and limited scope. It is created to achieve a defined objective, whether it's to manage certain assets, execute a specific project. “It is an association of two or more persons to carry out Module 2B a single business enterprise for profit. It relates to a Discussion Points: single transaction rather than to a continuous business A.​ Commencement of Partnership (L. Teller, Law of Partnership, 1949 ed., p. 20.) and is, 4 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) B.​ Partnership with a Fixed Term the fruits thereof from the time they should have been C.​ Obligation with Respect to Contribution of delivered, without the need of any demand. (1681a) Property: 1.​ to contribute what has been promised Article 1787. When the capital or a part thereof which a 2.​ to warrant specific and determinate partner is bound to contribute consists of goods, their property distributed to the partnership appraisal must be made in the manner prescribed in the 3.​ to deliver the fruits of the property from contract of partnership, and in the absence of the time they should have been stipulation, it shall be made by experts chosen by the delivered partners, and according to current prices, the 4.​ to properly appraised of the value subsequent changes thereof being for account of the D.​ Obligation with Respect to Contribution of partnership. (n) Money and Money Converted to Personal Use Article 1788. A partner who has undertaken to E.​ Obligation not to Engage in Other Business contribute a sum of money and fails to do so becomes a for Himself debtor for the interest and damages from the time he 1.​ Industrial Partner should have complied with his obligation. 2.​ Capitalist Partner 3.​ Obligation to Extend Contribute The same rule applies to any amount he may have taken Additional Capital from the partnership coffers, and his liability shall begin F.​ Obligation of Managing Partner who from the time he converted the amount to his own use. Collects Debt v. Partner who Receives (1682) Partnership Credit G.​ Obligation of Partner for Damages to Article 1789. An industrial partner cannot engage in Partnership business for himself, unless the partnership expressly 1.​ Risk of Loss of Things Contributed permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm Required Readings: or avail themselves of the benefits which he may have obtained in violation of this provision, with a right to Article 1784. A partnership begins from the moment of damages in either case. (n) the execution of the contract, unless it is otherwise stipulated. (1679) Article 1790. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital Article 1785. When a partnership for a fixed term or of the partnership. (n) particular undertaking is continued after the termination of such term or particular undertaking without any Article 1791. If there is no agreement to the contrary, in express agreement, the rights and duties of the partners case of an imminent loss of the business of the remain the same as they were at such termination, so partnership, any partner who refuses to contribute an far as is consistent with a partnership at will. additional share to the capital, except an industrial partner, to save the venture, shall he obliged to sell his A continuation of the business by the partners or such of interest to the other partners. (n) them as habitually acted therein during the term, without any settlement or liquidation of the partnership Article 1792. If a partner authorized to manage collects affairs, is prima facie evidence of a continuation of the a demandable sum which was owed to him in his own partnership. (n) name, from a person who owed the partnership another sum also demandable, the sum thus collected shall be Article 1786. Every partner is a debtor of the partnership applied to the two credits in proportion to their amounts, for whatever he may have promised to contribute even though he may have given a receipt for his own thereto. credit only; but should he have given it for the account of the partnership credit, the amount shall be fully He shall also be bound for warranty in case of eviction applied to the latter. with regard to specific and determinate things which he may have contributed to the partnership, in the same The provisions of this article are understood to be cases and in the same manner as the vendor is bound without prejudice to the right granted to the other with respect to the vendee. He shall also be liable for 5 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) debtor by article 1252, but only if the personal credit of the partner should be more onerous to him. (1684) Article 1793. A partner who has received, in whole or in part, his share of a partnership credit, when the other partners have not collected theirs, shall be obliged, if the debtor should thereafter become insolvent, to bring to the partnership capital what he received even though he may have given receipt for his share only. (1685a) Article 1794. Every partner is responsible to the partnership for damages suffered by it through his fault, and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. However, the courts may equitably lessen this responsibility if through the partner's extraordinary efforts in other activities of the partnership, unusual profits have been realized. (1686a) Article 1795. The risk of specific and determinate things, which are not fungible, contributed to the partnership so that only their use and fruits may be for the common benefit, shall be borne by the partner who owns them. If the things contributed are fungible, or cannot be kept without deteriorating, or if they were contributed to be sold, the risk shall be borne by the partnership. In the absence of stipulation, the risk of the things brought and appraised in the inventory, shall also be borne by the partnership, and in such case the claim shall be limited to the value at which they were appraised. (1687) 6 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Module 3A D.​ Stipulation excluding a Partner from any Discussion Points: Share in Profits and Losses A.​ Responsibility of Partnership to Partners Related articles: Related articles: Article 1799. A stipulation which excludes one or more Article 1796. The partnership shall be responsible to partners from any share in the profits or losses is void. every partner for the amounts he may have disbursed (1691) on behalf of the partnership and for the corresponding interest, from the time the expense are made*; it shall E.​ Appointment of a Managing Partner also answer to each partner for the obligations he may 1.​ Appointment of MP in the Articles of have contracted in good faith in the interest of the Partnership partnership business, and for risks in consequence of its 2.​ Appointment of MP after Constitution of management. (1688a) the Partnership *the partner who spends money (in good faith for the business) is entitled to receive a reimbursement from the partnership, even with Related articles: interest Article 1800. The partner who has been appointed B.​ Rules for Distribution of Profits and Losses manager in the articles of partnership may execute all 1.​ Distribution of Profits acts of administration despite the opposition of his 2.​ Distribution of Losses partners, unless he should act in bad faith; and his power is irrevocable without just or lawful cause. The Related articles: vote of the partners representing the controlling interest Article 1797. The losses and profits shall be distributed shall be necessary for such revocation of power. in conformity with the agreement. If only the share of each partner in the profits has been agreed upon, the A power granted after the partnership has been share of each in the losses shall be in the same constituted may be revoked at any time. (1692a) proportion. F.​ When 2 or more MP have been entrusted In the absence of stipulation, the share of each partner with management in the profits and losses shall be in proportion to what he may have contributed, but the industrial partner shall Related articles: not be liable for the losses. As for the profits, the Article 1801. If two or more partners have been industrial partner shall receive such share as may be just intrusted with the management of the partnership and equitable under the circumstances. If besides his without specification of their respective duties, or services he has contributed capital, he shall also receive without a stipulation that one of them shall not act a share in the profits in proportion to his capital. (1689a) without the consent of all the others, each one may separately execute all acts of administration, but if any C.​ Designation of share in Profits and Losses of them should oppose the acts of the others, the by Third Persons decision of the majority shall prevail. In case of a tie, the matter shall be decided by the partners owning the Related articles: controlling interest. (1693a) Article 1798. If the partners have agreed to intrust to a third person the designation of the share of each one in 1.​ When Manner of Management has unanimity of action the profits and losses, such designation may be impugned* only when it is manifestly inequitable. In no Related articles: case may a partner who has begun to execute the Article 1802. In case it should have been stipulated that decision of the third person, or who has not impugned none of the managing partners shall act without the the same within a period of three months from the time consent of the others, the concurrence of all shall be he had knowledge thereof, complain of such decision. *call into question; challenge necessary for the validity of the acts, and the absence or disability of any one of them cannot be alleged, unless The designation of losses and profits cannot be intrusted there is imminent danger of grave or irreparable injury to one of the partners. (1690) to the partnership. (1694) 7 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) 2.​ When Manner of Management has not *Article 1807 simplified: Ensures that partners act in the best interests of the partnership and not for their own personal enrichment at the been agreed expense of the partnership. Related articles: Article 1808*. The capitalist partners cannot engage for Article 1803. When the manner of management has not their own account in any operation which is of the kind been agreed upon, the following rules shall be observed: of business in which the partnership is engaged, unless there is a stipulation to the contrary. All the partners shall be considered agents and whatever any one of them may do alone shall bind the Any capitalist partner violating this prohibition shall bring partnership, without prejudice to the provisions of article to the common funds any profits accruing to him from 1801. his transactions, and shall personally bear all the losses. (n) None of the partners may, without the consent of the *Articles 1808 simplified: A partner cannot engage in any other others, make any important alteration in the immovable business without the others consent that may derive them of profits. property of the partnership, even if it may be useful to In short, they cannot make a business that becomes a rival to the partnership. the partnership. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of Article 1809. Any partner shall have the right to a formal the partnership, the court's intervention may be sought. account as to partnership affairs: (1695a) (1)​ If he is wrongfully excluded from the partnership business or possession of its property by his G.​ Contract of Sub-Partnership co-partners; (2)​ If the right exists under the terms of any Related articles: agreement; Article 1804. Every partner may associate another (3)​ As provided by article 1807; person with him in his share, but the associate shall not (4)​ Whenever other circumstances render it just and be admitted into the partnership without the consent of reasonable. (n) all the other partners, even if the partner having an associate should be a manager. (1696) Module 3B H.​ Rights of Partners 1.​ Right to Access Partnership Books Discussion Points: 2.​ Right to Demand True and Full A.​ Extent of Property Rights of Partners Information 1.​ Partnership Property v. Partnership 3.​ Right of a Partner to Formal Account Capital B.​ Rights to Specific Partnership Property 1.​ Equal Right of Possession of the Related articles: Property Article 1805. The partnership books shall be kept, 2.​ Assignment of Right to the Property subject to any agreement between the partners, at the 3.​ Attachment or Execution principal place of business of the partnership, and every 4.​ Legal Support partner shall at any reasonable hour have access to and C.​ Interest in the Partnership may inspect and copy any of them. (n) D.​ Effect of Assignment of Partner's Whole Interest in the Partnership Article 1806. Partners shall render on demand true and E.​ Remedies of Separate Judgment Creditor full information of all things affecting the partnership to F.​ Firm Name any partner or the legal representative of any deceased G.​ Liability for Contractual Obligations partner or of any partner under legal disability. (n) H.​ Liability of Partnership for Acts of Partners 1.​ As among themselves Article 1807*. Every partner must account to the 2.​ As to third persons partnership for any benefit, and hold as trustee for it any I.​ Conveyance of Real Property belonging to profits derived by him without the consent of the other Partnership partners from any transaction connected with the formation, conduct, or liquidation of the partnership or Required Readings: from any use by him of its property. (n) Article 1810. The property rights of a partner are: 8 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) (1)​ His rights in specific partnership property; Article 1814. Without prejudice to the preferred rights of (2)​ His interest in the partnership; and partnership creditors under article 1827, on due (3)​ His right to participate in the management (n) application to a competent court by any judgment creditor of a partner, the court which entered the Article 1811. A partner is co-owner with his partners of judgment, or any other court, may charge the interest of specific partnership property. the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon; The incidents of this co-ownership are such that: and may then or later appoint a receiver of his share of (1)​ A partner, subject to the provisions of this Title the profits, and of any other money due or to fall due to and to any agreement between the partners, him in respect of the partnership, and make all other has an equal right with his partners to possess orders, directions, accounts and inquiries which the specific partnership property for partnership debtor partner might have made, or which the purposes; but he has no right to possess such circumstances of the case may require. property for any other purpose without the consent of his partners; The interest charged may be redeemed at any time (2)​ A partner's right in specific partnership property before foreclosure, or in case of a sale being directed by is not assignable except in connection with the the court, may be purchased without thereby causing a assignment of rights of all the partners in the dissolution: same property; (1)​ With separate property, by any one or more of (3)​ A partner's right in specific partnership property the partners; or is not subject to attachment or execution, (2)​ With partnership property, by any one or more except on a claim against the partnership. When of the partners with the consent of all the partnership property is attached for a partners whose interests are not so charged or partnership debt the partners, or any of them, sold. or the representatives of a deceased partner, cannot claim any right under the homestead or Nothing in this Title shall be held to deprive a partner of exemption laws; his right, if any, under the exemption laws, as regards (4)​ A partner's right in specific partnership property his interest in the partnership. (n) is not subject to legal support under article 291. (n) Article 1815. Every partnership shall operate under a firm name, which may or may not include the name of Article 1812. A partner's interest in the partnership is his one or more of the partners. share of the profits and surplus. (n) Those who, not being members of the partnership, Article 1813. A conveyance by a partner of his whole include their names in the firm name, shall be subject to interest in the partnership does not of itself dissolve the the liability of a partner. (n) partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the Article 1816. All partners, including industrial ones, shall continuance of the partnership, to interfere in the be liable pro rata with all their property and after all the management or administration of the partnership partnership assets have been exhausted, for the business or affairs, or to require any information or contracts which may be entered into in the name and for account of partnership transactions, or to inspect the the account of the partnership, under its signature and partnership books; but it merely entitles the assignee to by a person authorized to act for the partnership. receive in accordance with his contract the profits to However, any partner may enter into a separate which the assigning partner would otherwise be entitled. obligation to perform a partnership contract. (n) However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual Article 1817. Any stipulation against the liability laid remedies. down in the preceding article shall be void, except as among the partners. (n) In case of a dissolution of the partnership, the assignee is entitled to receive his assignor's interest and may Article 1818. Every partner is an agent of the require an account from the date only of the last partnership for the purpose of its business, and the act account agreed to by all the partners. (n) of every partner, including the execution in the partnership name of any instrument, for apparently 9 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) carrying on in the usual way the business of the whose name the title stands may convey title to such partnership of which he is a member binds the property, but the partnership may recover such property partnership, unless the partner so acting has in fact no if the partners' act does not bind the partnership under authority to act for the partnership in the particular the provisions of the first paragraph of article 1818, matter, and the person with whom he is dealing has unless the purchaser or his assignee, is a holder for knowledge of the fact that he has no such authority. value, without knowledge. An act of a partner which is not apparently for the Where the title to real property is in the name of one or carrying on of business of the partnership in the usual more or all the partners, or in a third person in trust for way does not bind the partnership unless authorized by the partnership, a conveyance executed by a partner in the other partners. the partnership name, or in his own name, passes the equitable interest of the partnership, provided the act is Except when authorized by the other partners or unless one within the authority of the partner under the they have abandoned the business, one or more but less provisions of the first paragraph of article 1818. than all the partners have no authority to: (1)​ Assign the partnership property in trust for Where the title to real property is in the name of all the creditors or on the assignee's promise to pay the partners a conveyance executed by all the partners debts of the partnership; passes all their rights in such property. (n) (2)​ Dispose of the good-will of the business; (3)​ Do any other act which would make it Article 1820. An admission or representation made by impossible to carry on the ordinary business of a any partner concerning partnership affairs within the partnership; scope of his authority in accordance with this Title is (4)​ Confess a judgment; evidence against the partnership. (n) (5)​ Enter into a compromise concerning a partnership claim or liability; (6)​ Submit a partnership claim or liability to arbitration; (7)​ Renounce a claim of the partnership. No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge of the restriction. (n) Article 1819. Where title to real property is in the partnership name, any partner may convey title to such property by a conveyance executed in the partnership name; but the partnership may recover such property unless the partner's act binds the partnership under the provisions of the first paragraph of article 1818, or unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner, in making the conveyance, has exceeded his authority. Where title to real property is in the name of the partnership, a conveyance executed by a partner, in his own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of the first paragraph of article 1818. Where title to real property is in the name of one or more but not all the partners, and the record does not disclose the right of the partnership, the partners in 10 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Module 4A representation or consented to its being made in a Discussion Points: public manner he is liable to such person, whether the A.​ Notice to, or knowledge of matters representation has or has not been made or affecting partnership affairs communicated to such person so giving credit by or with the knowledge of the apparent partner making the Article 1821. Notice to any partner of any matter relating representation or consenting to its being made: to partnership affairs, and the knowledge of the partner (1)​ When a partnership liability results, he is liable acting in the particular matter, acquired while a partner as though he were an actual member of the or then present to his mind, and the knowledge of any partnership; other partner who reasonably could and should have (2)​ When no partnership liability results, he is liable communicated it to the acting partner, operate as notice pro rata with the other persons, if any, so to or knowledge of the partnership, except in the case of consenting to the contract or representation as fraud on the partnership, committed by or with the to incur liability, otherwise separately. consent of that partner. (n) When a person has been thus represented to be a B.​ Liability of Partners partner in an existing partnership, or with one or more 1.​ Solidary Liability for Partner's Wrongful persons not actual partners, he is an agent of the Act or Omission persons consenting to such representation to bind them 2.​ Solidary Liability for Breach of Trust to the same extent and in the same manner as though 3.​ Solidary Liability to Third Persons he were a partner in fact, with respect to persons who rely upon the representation. When all the members of Article 1822. Where, by any wrongful act or omission of the existing partnership consent to the representation, a any partner acting in the ordinary course of the business partnership act or obligation results; but in all other of the partnership or with the authority of his cases it is the joint act or obligation of the person acting co-partners, loss or injury is caused to any person, not and the persons consenting to the representation. (n) being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same D.​ Liability of Incoming Partner for extent as the partner so acting or omitting to act. (n) Partnership Obligations Article 1823. The partnership is bound to make good the Article 1826. A person admitted as a partner into an loss: existing partnership is liable for all the obligations of the (1)​ Where one partner acting within the scope of his partnership arising before his admission as though he apparent authority receives money or property had been a partner when such obligations were of a third person and misapplies it; and incurred, except that this liability shall be satisfied only (2)​ Where the partnership in the course of its out of partnership property, unless there is a stipulation business receives money or property of a third to the contrary. (n) person and the money or property so received is misapplied by any partner while it is in the E.​ Preference of Partnership Creditors in custody of the partnership. (n) Partnership Property Article 1824. All partners are liable solidarily with the Article 1827. The creditors of the partnership shall be partnership for everything chargeable to the partnership preferred to those of each partner as regards the under articles 1822 and 1823. (n) partnership property. Without prejudice to this right, the private creditors of each partner may ask the attachment C.​ Partnership by Estoppel and public sale of the share of the latter in the partnership assets. (n) Article 1825. When a person, by words spoken or written or by conduct, represents himself, or consents to F.​ Dissolution in General another representing him to anyone, as a partner in an existing partnership or with one or more persons not Article 1828. The dissolution of a partnership is the actual partners, he is liable to any such persons to change in the relation of the partners caused by any whom such representation has been made, who has, on partner ceasing to be associated in the carrying on as the faith of such representation, given credit to the distinguished from the winding up of the business. (n) actual or apparent partnership, and if he has made such 11 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) G.​ Effect of Dissolution Article 1831. On application by or for a partner the court shall decree a dissolution whenever: Article 1829. On dissolution the partnership is not (1)​ A partner has been declared insane in any terminated, but continues until the winding up of judicial proceeding or is shown to be of unsound partnership affairs is completed. (n) mind; (2)​ A partner becomes in any other way incapable H.​ Causes of Dissolution (Extrajudicial) of performing his part of the partnership contract; Article 1830. Dissolution is caused: (3)​ A partner has been guilty of such conduct as (1)​ Without violation of the agreement between the tends to affect prejudicially the carrying on of partners: the business; (a)​ By the termination of the definite term (4)​ A partner wilfully or persistently commits a or particular undertaking specified in the breach of the partnership agreement, or agreement; otherwise so conducts himself in matters (b)​ By the express will of any partner, who relating to the partnership business that it is not must act in good faith, when no definite reasonably practicable to carry on the business term or particular is specified; in partnership with him; (c)​ By the express will of all the partners (5)​ The business of the partnership can only be who have not assigned their interests or carried on at a loss; suffered them to be charged for their (6)​ Other circumstances render a dissolution separate debts, either before or after equitable. the termination of any specified term or particular undertaking; On the application of the purchaser of a partner's (d)​ By the expulsion of any partner from the interest under article 1813 or 1814: business bona fide in accordance with (1)​ After the termination of the specified term or such a power conferred by the particular undertaking; agreement between the partners; (2)​ At any time if the partnership was a partnership (2)​ In contravention of the agreement between the at will when the interest was assigned or when partners, where the circumstances do not permit the charging order was issued. (n) a dissolution under any other provision of this article, by the express will of any partner at any time; Module 4B (3)​ By any event which makes it unlawful for the Discussion Points: business of the partnership to be carried on or A.​ Termination of Authority for the members to carry it on in partnership; B.​ Dissolution due to Act, Insolvency or (4)​ When a specific thing which a partner had Death promised to contribute to the partnership, C.​ As to Third Persons perishes before the delivery; in any case by the D.​ As to Partner's Existing Liability loss of the thing, when the partner who E.​ Winding Up contributed it having reserved the ownership F.​ Rights of a Partner Upon Dissolution thereof, has only transferred to the partnership 1.​ Without violation/contravention of the use or enjoyment of the same; but the partnership agreement partnership shall not be dissolved by the loss of 2.​ In violation/ contravention of the thing when it occurs after the partnership partnership agreement has acquired the ownership thereof; G.​ Right of Partner to Rescind Contract of (5)​ By the death of any partner; Partnership (6)​ By the insolvency of any partner or of the H.​ Rules in Settling the Accounts between partnership; Partners after Dissolution (7)​ By the civil interdiction of any partner; I.​ Instances when creditors of Old (8)​ By decree of court under the following article. Partnership Continues to be creditors of (1700a and 1701a) the New J.​ Limited Partnership I.​ Cause of Judicial Dissolution Required Readings: 12 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Article 1832. Except so far as may be necessary to wind (1)​ Unknown as a partner to the person with whom up partnership affairs or to complete transactions begun the contract is made; and but not then finished, dissolution terminates all authority (2)​ So far unknown and inactive in partnership of any partner to act for the partnership: affairs that the business reputation of the (1)​ With respect to the partners, partnership could not be said to have been in (a)​ When the dissolution is not by the act, any degree due to his connection with it. insolvency or death of a partner; or (b)​ When the dissolution is by such act, The partnership is in no case bound by any act of a insolvency or death of a partner, in partner after dissolution: cases where article 1833 so requires; (2)​ With respect to persons not partners, as (1)​ Where the partnership is dissolved because it is declared in article 1834. (n) unlawful to carry on the business, unless the act is appropriate for winding up partnership affairs; Article 1833. Where the dissolution is caused by the act, or death or insolvency of a partner, each partner is liable to (2)​ Where the partner has become insolvent; or his co-partners for his share of any liability created by (3)​ Where the partner has no authority to wind up any partner acting for the partnership as if the partnership affairs; except by a transaction with partnership had not been dissolved unless: one who - (1)​ The dissolution being by act of any partner, the (a)​ Had extended credit to the partnership partner acting for the partnership had prior to dissolution and had no knowledge of the dissolution; or knowledge or notice of his want of (2)​ The dissolution being by the death or insolvency authority; or of a partner, the partner acting for the (b)​ Had not extended credit to the partnership had knowledge or notice of the partnership prior to dissolution, and, death or insolvency. having no knowledge or notice of his want of authority, the fact of his want of Article 1834. After dissolution, a partner can bind the authority has not been advertised in the partnership, except as provided in the third paragraph of manner provided for advertising the fact this article: of dissolution in the first paragraph, No. (1)​ By any act appropriate for winding up 2 (b). partnership affairs or completing transactions unfinished at dissolution; Nothing in this article shall affect the liability under (2)​ By any transaction which would bind the article 1825 of any person who after dissolution partnership if dissolution had not taken place, represents himself or consents to another representing provided the other party to the transaction: him as a partner in a partnership engaged in carrying on (a)​ Had extended credit to the partnership business. (n) prior to dissolution and had no knowledge or notice of the dissolution; Article 1835. The dissolution of the partnership does not or of itself discharge the existing liability of any partner. (b)​ Though he had not so extended credit, had nevertheless known of the A partner is discharged from any existing liability upon partnership prior to dissolution, and, dissolution of the partnership by an agreement to that having no knowledge or notice of effect between himself, the partnership creditor and the dissolution, the fact of dissolution had person or partnership continuing the business; and such not been advertised in a newspaper of agreement may be inferred from the course of dealing general circulation in the place (or in between the creditor having knowledge of the each place if more than one) at which dissolution and the person or partnership continuing the the partnership business was regularly business. carried on. The individual property of a deceased partner shall be The liability of a partner under the first paragraph, No. liable for all obligations of the partnership incurred while 2, shall be satisfied out of partnership assets alone when he was a partner, but subject to the prior payment of his such partner had been prior to dissolution: separate debts. (n) 13 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Article 1836. Unless otherwise agreed, the partners who for damages in the second paragraph, have not wrongfully dissolved the partnership or the No. 1 (b), of this article. legal representative of the last surviving partner, not (b)​ If the business is continued under the insolvent, has the right to wind up the partnership second paragraph, No. 2, of this article, affairs, provided, however, that any partner, his legal the right as against his co-partners and representative or his assignee, upon cause shown, may all claiming through them in respect of obtain winding up by the court. (n) their interests in the partnership, to have the value of his interest in the Article 1837. When dissolution is caused in any way, partnership, less any damage caused to except in contravention of the partnership agreement, his co-partners by the dissolution, each partner, as against his co-partners and all persons ascertained and paid to him in cash, or claiming through them in respect of their interests in the the payment secured by a bond partnership, unless otherwise agreed, may have the approved by the court, and to be partnership property applied to discharge its liabilities, released from all existing liabilities of and the surplus applied to pay in cash the net amount the partnership; but in ascertaining the owing to the respective partners. But if dissolution is value of the partner's interest the value caused by expulsion of a partner, bona fide under the of the good-will of the business shall not partnership agreement and if the expelled partner is be considered. (n) discharged from all partnership liabilities, either by payment or agreement under the second paragraph of Article 1838. Where a partnership contract is rescinded article 1835, he shall receive in cash only the net on the ground of the fraud or misrepresentation of one amount due him from the partnership. of the parties thereto, the party entitled to rescind is, without prejudice to any other right, entitled: When dissolution is caused in contravention of the (1)​ To a lien on, or right of retention of, the surplus partnership agreement the rights of the partners shall be of the partnership property after satisfying the as follows: partnership liabilities to third persons for any (1)​ Each partner who has not caused dissolution sum of money paid by him for the purchase of wrongfully shall have: an interest in the partnership and for any capital (a)​ All the rights specified in the first or advances contributed by him; paragraph of this article, and (2)​ To stand, after all liabilities to third persons have (b)​ The right, as against each partner who been satisfied, in the place of the creditors of has caused the dissolution wrongfully, to the partnership for any payments made by him damages breach of the agreement. in respect of the partnership liabilities; and (2)​ The partners who have not caused the (3)​ To be indemnified by the person guilty of the dissolution wrongfully, if they all desire to fraud or making the representation against all continue the business in the same name either debts and liabilities of the partnership. (n) by themselves or jointly with others, may do so, during the agreed term for the partnership and Article 1839. In settling accounts between the partners for that purpose may possess the partnership after dissolution, the following rules shall be observed, property, provided they secure the payment by subject to any agreement to the contrary: bond approved by the court, or pay any partner (1)​ The assets of the partnership are: who has caused the dissolution wrongfully, the (a)​ The partnership property, value of his interest in the partnership at the (b)​ The contributions of the partners dissolution, less any damages recoverable under necessary for the payment of all the the second paragraph, No. 1 (b) of this article, liabilities specified in No. 2. and in like manner indemnify him against all (2)​ The liabilities of the partnership shall rank in present or future partnership liabilities. order of payment, as follows: (3)​ A partner who has caused the dissolution (a)​ Those owing to creditors other than wrongfully shall have: partners, (a)​ If the business is not continued under (b)​ Those owing to partners other than for the provisions of the second paragraph, capital and profits, No. 2, all the rights of a partner under (c)​ Those owing to partners in respect of the first paragraph, subject to liability capital, 14 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) (d)​ Those owing to partners in respect of (3)​ When any partner retires or dies and the profits. business of the dissolved partnership is (3)​ The assets shall be applied in the order of their continued as set forth in Nos. 1 and 2 of this declaration in No. 1 of this article to the article, with the consent of the retired partners satisfaction of the liabilities. or the representative of the deceased partner, (4)​ The partners shall contribute, as provided by but without any assignment of his right in article 1797, the amount necessary to satisfy the partnership property; liabilities. (4)​ When all the partners or their representatives (5)​ An assignee for the benefit of creditors or any assign their rights in partnership property to one person appointed by the court shall have the or more third persons who promise to pay the right to enforce the contributions specified in the debts and who continue the business of the preceding number. dissolved partnership; (6)​ Any partner or his legal representative shall (5)​ When any partner wrongfully causes a have the right to enforce the contributions dissolution and the remaining partners continue specified in No. 4, to the extent of the amount the business under the provisions of article which he has paid in excess of his share of the 1837, second paragraph, No. 2, either alone or liability. with others, and without liquidation of the (7)​ The individual property of a deceased partner partnership affairs; shall be liable for the contributions specified in (6)​ When a partner is expelled and the remaining No. 4. partners continue the business either alone or (8)​ When partnership property and the individual with others without liquidation of the properties of the partners are in possession of a partnership affairs. court for distribution, partnership creditors shall have priority on partnership property and The liability of a third person becoming a partner in the separate creditors on individual property, saving partnership continuing the business, under this article, the rights of lien or secured creditors. to the creditors of the dissolved partnership shall be (9)​ Where a partner has become insolvent or his satisfied out of the partnership property only, unless estate is insolvent, the claims against his there is a stipulation to the contrary. separate property shall rank in the following order: When the business of a partnership after dissolution is (a)​ Those owing to separate creditors continued under any conditions set forth in this article (b)​ Those owing to partnership creditors; the creditors of the dissolved partnership, as against the (c)​ Those owing to partners by way of separate creditors of the retiring or deceased partner or contribution. (n) the representative of the deceased partner, have a prior right to any claim of the retired partner or the Article 1840. In the following cases creditors of the representative of the deceased partner against the dissolved partnership are also creditors of the person or person or partnership continuing the business, on partnership continuing the business: account of the retired or deceased partner's interest in (1)​ When any new partner is admitted into an the dissolved partnership or on account of any existing partnership, or when any partner retires consideration promised for such interest or for his right and assigns (or the representative of the in partnership property. deceased partner assigns) his rights in partnership property to two or more of the Nothing in this article shall be held to modify any right of partners, or to one or more of the partners and creditors to set aside any assignment on the ground of one or more third persons, if the business is fraud. continued without liquidation of the partnership affairs; The use by the person or partnership continuing the (2)​ When all but one partner retire and assign (or business of the partnership name, or the name of a the representative of a deceased partner deceased partner as part thereof, shall not of itself make assigns) their rights in partnership property to the individual property of the deceased partner liable for the remaining partner, who continues the any debts contracted by such person or partnership. (n) business without liquidation of partnership affairs, either alone or with others; Article 1841. When any partner retires or dies, and the business is continued under any of the conditions set 15 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) forth in the preceding article, or in article 1837, second paragraph, No. 2, without any settlement of accounts as between him or his estate and the person or partnership continuing the business, unless otherwise agreed, he or his legal representative as against such person or partnership may have the value of his interest at the date of dissolution ascertained, and shall receive as an ordinary creditor an amount equal to the value of his interest in the dissolved partnership with interest, or, at his option or at the option of his legal representative, in lieu of interest, the profits attributable to the use of his right in the property of the dissolved partnership; provided that the creditors of the dissolved partnership as against the separate creditors, or the representative of the retired or deceased partner, shall have priority on any claim arising under this article, as provided article 1840, third paragraph. (n) Article 1842. The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the contrary. (n) Article 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the partnership. 16 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Module 5A (n)​ The right, if given, of a limited partner Discussion Points: to demand and receive property other A.​ Formation of a Limited Partnership than cash in return for his contribution. CONTEXT: In essence, a limited partner is primarily an (2)​ File for record the certificate in the Office of the investor who is not involved in the day-to-day Securities and Exchange Commission. management of the business and whose liability is limited to their investment. A limited partnership is formed if there has been substantial compliance in good faith with the foregoing Article 1844. Two or more persons desiring to form a requirements. limited partnership shall: (1)​ Sign and swear to a certificate, which shall B.​ Name and Contribution state: (a)​ The name of the partnership, adding Article 1845. The contributions of a limited partner may thereto the word "Limited"; be cash or property, but not services. (b)​ The character of the business; (c)​ The location of the principal place of Article 1846. The surname of a limited partner shall not business; appear in the partnership name unless: (d)​ The name and place of residence of (1)​ It is also the surname of a general partner, or each member, general and limited (2)​ Prior to the time when the limited partner partners being respectively designated; became such, the business has been carried on (e)​ The term for which the partnership is to under a name in which his surname appeared. exist; (f)​ The amount of cash and a description of A limited partner whose surname appears in a and the agreed value of the other partnership name contrary to the provisions of the first property contributed by each limited paragraph is liable as a general partner to partnership partner; creditors who extend credit to the partnership without (g)​ The additional contributions, if any, to actual knowledge that he is not a general partner. be made by each limited partner and the times at which or events on the C.​ Liability of a Limited Partner as a General happening of which they shall be made; Partner (h)​ The time, if agreed upon, when the contribution of each limited partner is to Article 1848. A limited partner shall not become liable as be returned; a general partner unless, in addition to the exercise of (i)​ The share of the profits or the other his rights and powers as a limited partner, he takes part compensation by way of income which in the control of the business. each limited partner shall receive by reason of his contribution; D.​ Admission of Additional Limited Partners (j)​ The right, if given, of a limited partner to substitute an assignee as contributor Article 1849. After the formation of a lifted partnership, in his place, and the terms and additional limited partners may be admitted upon filing conditions of the substitution; an amendment to the original certificate in accordance (k)​ The right, if given, of the partners to with the requirements of article 1865. admit additional limited partners; (l)​ The right, if given, of one or more of the E.​ Rights, Powers and Liabilities of a General limited partners to priority over other Partner in a Limited Partnership limited partners, as to contributions or as to compensation by way of income, Article 1850. A general partner shall have all the rights and the nature of such priority; and powers and be subject to all the restrictions and (m)​The right, if given, of the remaining liabilities of a partner in a partnership without limited general partner or partners to continue partners. However, without the written consent or the business on the death, retirement, ratification of the specific act by all the limited partners, civil interdiction, insanity or insolvency a general partner or all of the general partners have no of a general partner; and authority to: 17 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) F.​ Do any act in contravention of the certificate; erroneously believing that he has become a limited G.​ Do any act which would make it impossible to partner in a limited partnership, is not, by reason of his carry on the ordinary business of the exercise of the rights of a limited partner, a general partnership; partner with the person or in the partnership carrying on H.​ Confess a judgment against the partnership; the business, or bound by the obligations of such person I.​ Possess partnership property, or assign their or partnership, provided that on ascertaining the mistake rights in specific partnership property, for other he promptly renounces his interest in the profits of the than a partnership purpose; business, or other compensation by way of income. J.​ Admit a person as a general partner; K.​ Admit a person as a limited partner, unless the O.​ Allowable Transactions of Limited Partners right so to do is given in the certificate; P.​ Preferred Limited Partners L.​ Continue the business with partnership property on the death, retirement, insanity, civil Article 1853. A person may be a general partner and a interdiction or insolvency of a general partner, limited partner in the same partnership at the same unless the right so to do is given in the time, provided that this fact shall be stated in the certificate. certificate provided for in article 1844. M.​ Rights of a Limited Partner A person who is a general, and also at the same time a limited partner, shall have all the rights and powers and Article 1851. A limited partner shall have the same rights be subject to all the restrictions of a general partner; as a general partner to: except that, in respect to his contribution, he shall have (1)​ Have the partnership books kept at the principal the rights against the other members which he would place of business of the partnership, and at a have had if he were not also a general partner. reasonable hour to inspect and copy any of them; Article 1854. A limited partner also may loan money to (2)​ Have on demand true and full information of all and transact other business with the partnership, and, things affecting the partnership, and a formal unless he is also a general partner, receive on account of account of partnership affairs whenever resulting claims against the partnership, with general circumstances render it just and reasonable; and creditors, a pro rata share of the assets. No limited (3)​ Have dissolution and winding up by decree of partner shall in respect to any such claim: court. (1)​ Receive or hold as collateral security any partnership property, or A limited partner shall have the right to receive a share (2)​ Receive from a general partner or the of the profits or other compensation by way of income, partnership any payment, conveyance, or and to the return of his contribution as provided in release from liability if at the time the assets of articles 1856 and 1857. the partnership are not sufficient to discharge partnership liabilities to persons not claiming as N.​ Status of a Person Erroneously believing general or limited partners. to be a Limited Partner The receiving of collateral security, or payment, Article 1847. If the certificate contains a false statement, conveyance, or release in violation of the foregoing one who suffers loss by reliance on such statement may provisions is a fraud on the creditors of the partnership. hold liable any party to the certificate who knew the statement to be false: Article 1855. Where there are several limited partners (1)​ At the time he signed the certificate, or the members may agree that one or more of the limited (2)​ Subsequently, but within a sufficient time before partners shall have a priority over other limited the statement was relied upon to enable him to partners as to the return of their contributions, as cancel or amend the certificate, or to file a to their compensation by way of income, or as to petition for its cancellation or amendment as any other matter. If such an agreement is made it provided in article 1865. shall be stated in the certificate, and in the absence of such a statement all the limited partners shall stand Article 1852. Without prejudice to the provisions of upon equal footing. article 1848, a person who has contributed to the capital of a business conducted by a person or partnership 18 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) Article 1856. A limited partner may receive from the contribution or for the dissolution of the partnership the share of the profits or the compensation partnership. by way of income stipulated for in the certificate; provided, that after such payment is made, whether In the absence of any statement in the certificate to the from property of the partnership or that of a general contrary or the consent of all members, a limited partner, the partnership assets are in excess of all partner, irrespective of the nature of his contribution, liabilities of the partnership except liabilities to limited has only the right to demand and receive cash in return partners on account of their contributions and to general for his contribution. partners. A limited partner may have the partnership dissolved and its affairs wound up when: Module 5B (1)​ He rightfully but unsuccessfully demands the Discussion Points: return of his contribution, or A.​ Return of Contribution of Limited Partners (2)​ The other liabilities of the partnership have not B.​ Liability of a Limited Partner as a Limited been paid, or the partnership property is Partner insufficient for their payment as required by the C.​ Substituted/ Assignee of a Limited Partner first paragraph, No. 1, and the limited partner D.​ Causes of Dissolution of a Limited would otherwise be entitled to the return of his Partnership contribution. E.​ Right of Executor or Administrator on the death of a Limited Partner Article 1858. A limited partner is liable to the F.​ Rights of Creditors of Limited Partners partnership: G.​ Settling of Accounts or Liabilities after (1)​ For the difference between his contribution as Dissolution of Limited Partnership actually made and that stated in the certificate H.​ Cancellation or Amendment of Certificate as having been made, and of Limited Partnership (2)​ For any unpaid contribution which he agreed in the certificate to make in the future at the time Required Readings: and on the conditions stated in the certificate. Article 1857. A limited partner shall not receive from a A limited partner holds as trustee for the partnership: general partner or out of partnership property any part (1)​ Specific property stated in the certificate as of his contributions until: contributed by him, but which was not (1)​ All liabilities of the partnership, except liabilities contributed or which has been wrongfully to general partners and to limited partners on returned, and account of their contributions, have been paid or (2)​ Money or other property wrongfully paid or there remains property of the partnership conveyed to him on account of his contribution. sufficient to pay them; (2)​ The consent of all members is had, unless the The liabilities of a limited partner as set forth in this return of the contribution may be rightfully article can be waived or compromised only by the demanded under the provisions of the second consent of all members; but a waiver or compromise paragraph; and shall not affect the right of a creditor of a partnership (3)​ The certificate is cancelled or so amended as to who extended credit or whose claim arose after the filing set forth the withdrawal or reduction. and before a cancellation or amendment of the certificate, to enforce such liabilities. Subject to the provisions of the first paragraph, a limited partner may rightfully demand the return of his When a contributor has rightfully received the return in contribution: whole or in part of the capital of his contribution, he is (1)​ On the dissolution of a partnership; or nevertheless liable to the partnership for any sum, not in (2)​ When the date specified in the certificate for its excess of such return with interest, necessary to return has arrived, or discharge its liabilities to all creditors who extended (3)​ After he has six months' notice in writing to all credit or whose claims arose before such return. other members, if no time is specified in the certificate, either for the return of the Article 1859. A limited partner's interest is assignable. 19 [COBLAW2] LAW ON BUSINESS ORGANIZATIONS (PARTNERSHIP AND CORPORATION) A substituted limited partner is a person admitted to all directions and inquiries which the circumstances of the the rights of a limited partner who has died or has case may require. assigned his interest in a partnership. The interest may be redeemed with the separate An assignee, who does not become a substituted limited property of any general partner, but may not be partner, has no right to require any information or redeemed with partnership property. account of the partnership transactions or to inspect the partnership books; he is only entitled to receive the The remedies conferred by the first paragraph shall not share of the profits or other compensation by way of be deemed exclusive of others which may exist. income, or the return of his contribution, to which his assignor would otherwise be entitled. Nothing in this Chapter shall be held to deprive a limited partner of his statutory exemption. An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if Article 1863. In settling accounts after dissolution the the assignor, being thereunto empowered by the liabilities of the partnership shall be entitled to payment certificate, gives the assignee that right. in the following order: (1)​ Those to creditors, in the order of priority as An assignee becomes a substituted limited partner when provided by law, except those to limited partners the certificate is appropriately amended in accordance on account of their contributions, and to general with article 1865. partners; (2)​ Those to limited partners in respect to their The substituted limited partner has all the rights and share of the profits and other compensation by powers, and is subject to all the restrictions and way of income on their contributions; liabilities of his assignor, except those liabilities of which (3)​ Those to limited partners in respect to the he was ignorant at the time he became a limited partner capital of their contributions; and which could not be ascertained from the certificate. (4)​ Those to general partners other than for capital and profits; The substitution of the assignee as a limited partner (5)​ Those to general partners in respect to profits; does not release the assignor from liability to the (6)​ Those to general partners in respect to capital. partnership under articles 1847 and 1858. Subject to any statement in the certificate or to Article 1860. The retirement, death, insolvency, insanity subsequent agreement, limited partners share in the or civil interdiction of a general partner dissolves the partnership assets in respect to their claims for capital, partnership, unless the business is continued by the and in respect to their claims for profits or for remaining general partners: compensation by way of income on their contribution (1)​ Under a right so to do stated in the certificate, respectively, in proportion to the respective amounts of or such claims. (2)​ With the consent of all m